Samsung Electronics saw its operating profits diving by nearly 40 percent in the fourth quarter last year, mainly on weakening market demand for memory chips, the company said Tuesday.
The world’s largest manufacturer of chips and smartphones posted 10.8 trillion won in operating profits in the past three months, a 38.5 percent decrease from 15.1 trillion won posted for the previous quarter.
Prices for DRAM chips, which provide devices with temporary workspaces and allow them to multi-task, fell 10 percent in the fourth quarter, showed data from industry tracker DRAMeXchange. Prices of NAND flash memory chips, which hold data permanently, slipped 15 percent.
DRAMeXchange expects memory chip prices to fall 10 percent on an average in the first quarter of 2019.
It is the lowest operating profit figure since the first quarter of 2017. Sales also dropped 9.9 percent to 59 trillion won from the June-Sept. period. The company plans to release its net profits by the end of January.
In a move to ease market confusion, the company issued a statement saying weak memory chip sales and escalating market uncertainties were to blame for its lower-than-expected earnings.
Samsung said profits would remain weak in the first quarter of this year, but could be expected to rebound in the second half on the anticipated recovery of the memory chip market. The company added a comment four years ago when its smartphone business hit bottom.
However, Samsung expressed confidence that its profitability would recover in the second half. Market analysts backed Samsung’s prediction, citing the company’s new CPUs and the planned debut of a foldable smartphone.
But Samsung may have to reduce its chip production capacity if it is to achieve a recovery in the second half, considering the pressure the company and its smaller rival SK hynix face to cut chip prices.